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Stop the deception and tell the Truth.

If you are like me, you have probably had it with this ‘debt and deficit disaster’ mantra that is peddled incessantly by the Prime Minister, the Treasurer and the rest of this disorganised, ideological rabble who call themselves a government.

Is it too much to ask that they tell the truth and stop deceiving the Australian people into believing that running the economy of a country is the same as running the economy of a household?

The number of times I read and hear comments from people along the lines, “Labor left us with a humongous debt and now the Liberals have to clean up the mess,” is extraordinary, but more importantly, utterly ignorant of the truth. Can we really be that stupid? Yes we can. Yes we are.

bondsWhen I explain to them the ‘debt’ they are referring to, is actually the ongoing issuance of Commonwealth Government Bonds, Indexed Treasury Bonds and Short Term Treasury Notes, they look at me dumbfounded.

When I explain, in words of one syllable, that these bonds and notes have been the means by which successive governments have controlled the flow of money for, at least, the past 100 years, their jaws move, their mouths open, but no sound is forthcoming.

Then, when I tell them that the Howard government authorised the Reserve Bank to continue issuing bonds even when the government didn’t need the money, their eyes blink, their noses twitch, the jaws move, the mouth opens but still no sound comes forth.

When I tell them that it’s to maintain the overnight inter-bank lending rate, something that will continue for the next 100 years, they nod slowly as if to indicate their understanding of the situation. But they don’t really.

When I tell them that the Howard government did not leave the economy “debt” free, that the total amount of bonds and notes on issue in 2007 when the Howard government was defeated was $96 billion, they gulp but again, say nothing. Only when I tell them that by September 2013, when Labor lost government the total amount of bonds and notes on issue was $284 billion do they seem to agree.

When I tell them that as of today, in late November 2014, the total amount of bonds and notes on issue is $344 billion they shake their heads, open and close their mouths, turn away, scratch their noses, but are back to playing dumbstruck.

I’d like to tell them that these bonds will never need repaying, but I fear the shock would be too great.

So I tell them that this is what Joe Hockey calls the “national debt.”

joeIf Hockey, and the rest of them want to call it debt, they have to acknowledge that they have been borrowing at the rate of $1 billion a week since coming to government. But, if you were to ask them to acknowledge that, I’m betting they will just say it’s all Labor’s fault. But the truth is, it isn’t anyone’s fault. That money has kept hundreds of thousands in work.

It has kept businesses viable. It has maintained a healthy economy. It isn’t debt at all. It is how a country’s economy works. It is the way the Reserve Bank controls and keeps a properly regulated banking system viable, enabling banks to create money, keeping businesses in business, keeping people employed.

It’s not just Hockey deceiving us, all Treasurers do it, Liberal and Labor. Which indicates that none of them know how this “debt” works. Or, they don’t want us to know. Well, it’s high time they either learned, or came clean and it’s high time we stopped referring to bonds, indexed bonds and treasury notes by this utterly fictitious name. They are not debt, they are Commonwealth Government Securities.

The one redeeming factor is that at least Labor governments are not frightened by them.

The big difference between the two parties in the way that they approach this matter is that Labor governments know, that whatever they are called, they stimulate growth which reduces unemployment. They know that they provide infrastructure that adds value in the movement of domestic produce to market and in the facilitation of our export industries. They know that they contribute to a high standard of living, of health and the education of our children who are our country’s future.

People like Tony Abbott aren’t looking that far ahead. Tony Abbott can’t see 16 years ahead. He probably can’t see beyond today. Neither can his government. That’s why organisations like the IPA have such a huge influence over them. The IPA acts as their counsellor, like parents to untrained children. But the IPA and like-minded groups have a quite different, more sinister agenda.

grossThey know that things like full employment, a highly educated nation and a more equal society where everyone enjoys the benefits of a strong Gross Domestic Product (GDP), actually threaten the super-rich, threaten their influence and threaten their power. A more equal society means less wealth, less power, for the super-rich.

These exclusive groups know that avoiding calling “national debt” by its proper name of “Commonwealth Government Securities” and concealing what those securities actually achieve for all of us, they can continue to further the aims and the objectives that keep all the power in the hands of the already powerful one per cent, the super-rich.

They want unemployment to continue because it keeps a lid on wages growth which is the biggest threat to their increased wealth. One only has to look at the root causes of the GFC to see the damage an unregulated banking framework will create. Greed, excessive greed and obscene greed are the root causes.

It is high time this deception was exposed for what it is. And we can start exposing it by replacing the words “government debt” and referring to the issuance of bonds and treasury notes by what they really are, “Commonwealth Government Securities.”

connedThen maybe, just maybe, some of the more illiterate, moronic, ill-informed cretins who slavishly follow the LNP in the mistaken belief that they are the better financial managers, will wake up and realise that the LNP has played them and conned them.

108 comments

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  1. Keitha Granville

    “some of the more illiterate, moronic, ill-informed cretins who slavishly follow the LNP ” – that’s just it though John, they will never have a clue because they are incapable of understanding the words you have written, the truth about this government’s lies. They only understand the 3 word slogans, the simple lies, because they are not prepared to try and learn something else. Sheep, easily led by the nose. Our only hope is the influx of young educated Australians who are thinking for themselves and learning the basic rules of an economy who will come to the fore next time or the time after (heaven forbid we have to wait till the time after, there’ll be nothing left of our country). Keep on writing stuff, keep on telling people how it REALLY is, maybe some will seep through the cracks of the great unwashed and they will understand.

  2. Wayne Turner

    They do it because the MSM promotes the LIE,and the ignorant stupid masses believe it.

    Our democracy fails,and continues to fail when the majority are ignorant,non-thinking,gullible and easily led.

    RIP AUSTRALIAN DEMOCRACY

  3. sandrasearle

    There must be a few of us oldies left who remember the good old days of government spending on things like the Snowy Hydro Scheme back in the 1950’s being accomplished. There was probably a lot more than this one, but I remember it well.
    I don’t remember my parents moaning about how much it was costing us, it was just part of nation building infrastructure.
    It has only been since the latter part of the 1900’s that all of a sudden we had successive governments trying to convince us that we need to keep a ‘household like budget’.
    John Kelly my had goes off to you for so eloquently giving my old memory a nudge. Hopefully more of us oldies will start to remember what proper governments run like, you know, the ones that really care about the nation and ALL of its people.

  4. John Turner

    This article misses one major problem. If Australia took action to manufacture more of the products that our citizens consume than the current account could return to surplus and we wouldn’t need so much in the way of government securities.
    For the Australian private sector (you me and local businesses) to gain financial wealth the annual government deficit must be greater than the annual Current Account deficit. From that it is possible to prove that the Howard/Costello Government was the worst in recent history.
    The other thing people don’t understand is that very high income people cannot spend their incomes in ways that assist the economy. It is the income that isn’t or cannot be spent in ways that assist the economy that should be taxed. That is why GST is such a stupid concept. It removes spending power from those who would spend it. That is also why the $900 payment in 2008 was the most sensible thing to do at that time. It doesn’t matter very much how the first recipients spent the money. Once spent in the first round each $900 became other people’s income, tax, or savings in a ongoing sequence until all the money ended up either as tax or savings. The savings end up in reality as the reserves of financial institutions which is invested in government securities. The moneys collected as federal taxes are destroyed.
    The interest rate paid on those savings is mainly set by the need to attract foreign currency to pay for our excessive imports. So if we get our Current Account under control that interest rate could be nil.

  5. John Kelly

    Yes, you are right, John Turner. But I didn’t want to over complicate the process. I wanted to keep it as simple as possible in the hope that it might engender a thirst for more, at a later time.

  6. flohri1754

    Thumbs up …. IF the concepts here were accepted by the majority up on the hill, ninety percent of the aggro would disappear and perhaps larger concepts and projects could get on the radar ….

  7. Loz

    Thanks for this great article.

  8. Lee

    Oh they know. About a month or so ago Christopher Pyne and Wayne Swann were on Q and A. Pyne asked Swann if he believed in Keynesian economics. His manner of asking and his response when Swann answered suggested that he knew all about it but didn’t accept it.

  9. David

    They are sticking to the one theory they hope will serve them as well, as when in Opposition, its all they have. Say it often enough and it will be believed as in Carbon, the great big tax on everything. Oh how they used those lines at every opportunity and the compliant media supported them 100%, including the peoples broadcaster, who now cry for those same peoples loyalty.
    The 3 yrs 2010 – 2013 I will always remember as the politically negative years, the birth of Abbott’s evil regime.

  10. mars08

    Why hasn’t Labor tried to neutralise this issue? Why are the leaving this bullshit essentially unchallenged?

  11. John Kelly

    Mars08, I’m sure they would like to but changing a well grounded mindset that is current public perception is a big ask. The LNP and their big money supporters would crucify them with all manner of lies, confusion and mis-reporting.
    To break through would take a huge effort. Having said that, it is not impossible.

  12. Annie B

    A truly excellent article John ….. thank you.

    I have to say ( at the risk of being shouted down ! ) …….. that while your article was spot on, a few comments posted here in answer, were a little negative.

    There are in fact many Liberal voters out there ( I don’t know many Libs, but ….. ) ….. who do have a head for economics, business, finance and what means what in the control of economy in our country.

    e.g. …….. I have absolutely NO idea who Craig James, Economy Expert and Commsec Advisor votes for. ( just one example ). But whoever he follows ( if any specifically ) ….. he certainly WOULD understand every word of your article John. Every syllable. And if perchance he is a Liberal supporter, he would also know the obfuscation being used by the current Government, to hide the facts – and to try and dumb down the public, in order to force a negative influence across the nation and to deny our people hope in a good future.

    This ‘dominance’, this blatant lying and fear mongering is no. 1 on their agenda. That is the trade mark of fascism.

    There must be many thousands of Liberal voters out there, who DO understand economics and how it works. And they would be really squirming at about this time.

    Forget the trolls that only get onto forums and social media to upset as many responders as possible. It’s the way they get their sick kicks, as you all know. They are a dime a dozen, and probably don’t even know how to properly fill in a ballot paper. They, of course, are not the people to appeal to.

    It’s the educated – and as noted here, the up and coming educated young, that need to be nudged into understanding our political structure, our Constitution, and the way this parliamentary system works. Not to mention the economic mores that accompany good Government.

    ———-

    Julie Bishop – on the 7.30 report last night, when faced with a question she didn’t want to, or could not answer – resorted YET AGAIN, to the thread-bare mantra of “we inheritied the problems of a massive deficit from the previous Government ” – yada yada yada. And she droned on about that for a minute or two. Leigh Sales ( remarkably ) did not interrupt her rant. I think she sat back and let her hang herself. Which she did.

    ———-

    Abbott must be double squirming at the thought of what might happen on 29th November in Victoria. It ain’t lookin’ too pretty for the Libs here – that’s for sure. But then polls are what they are – and anything could happen. I just hope that Daniel Andrews gets in – which will be one against Abbott’s duck house. He has a good team behind him.

  13. David

    Annie good points thanks. I suspect the answer to your Vic election query could well be…it is Labors to lose. When Murdoch.s polling companies give the ALP a 10 point lead there is more than a smidgen of truth there. I still regard Galaxy as the wild child of polling companies and there 52 – 48 to Labor is telling.

  14. mars08

    John Kelly:

    Mars08, I’m sure they would like to but changing a well grounded mindset that is current public perception is a big ask. The LNP and their big money supporters would crucify them with all manner of lies…

    Frankly, I suspect that there are those in the ALP who don’t want to neutralise this “issue”. As they saw first-hand, it’s far too useful as a means to bludgeon the incumbent PM. It is deeply embedded into the political landscape as a useful myth… complete with simplistic slogans and facile metaphors. It is a traditional campaign talking point.

    If the hysterical screech of “debt crisis” was disqualified as a political mantra, our politicians would have to find some REAL policies to convince the electorate. Far too much hard work!

    To paraphrase Voltaire… “Si une crise de la dette n’existait pas, nos hommes politiques faudrait l’inventer.”

  15. David

    Or just not lie about it, albeit lies and politcians words are firmly wed.

  16. Lee

    I agree with Mars. When the issue of Labor’s debt comes up, not a single person from the ALP points out that the deficit is not the same thing as debt. They obviously have reasons for not coming clean with the public.

  17. stephentardrew

    Great article John and comments John Turner.

    I think you guys worry too much. We are not the US yet and Labor has got so many bullets to fire before the election, The way things are going Julia might be quite an asset if she can recover from back stabbing Shorten and the right. Looks like independents are here to stay so its going to be fun. Lots of interesting subtexts that will remain subdued until close to the election. Its all about the economy and no amount of money will counter the mood of the electorate if the economy is still crap. The way they are going they have no hope of reducing the deficit without hitting their wealthy mates and the public are in no mood for moor austerity. They are caught in the double edged sword of Damocles .How to back yourself into a corner in one year. Any sniff of revived Work Choices will kill them. The IPA short list is just that. Oh what fun so let’s be a little upbeat. Still I would like to see Shorten wander off into the sunset.

  18. John Kelly

    Mars08, yes, if the debt crisis did not exist, the politicians would have to create one. Voltaire was no idiot.

  19. stephentardrew

    I think we are living on the edge of a very dangerous game of thrones driven by the US and EU against Russia, China and not yet overtly India. Ukraine is just an excuse. The US gave PM Modi, past leader of the Hindu Nationalist head bashers, a heroes welcome to get him onside but I think he is sitting prettily aligned with the BRICs while pacifying the US. Obama hires another Walls Street insider after waxing lyrical while at QU. The US attempt at global hegemony is falling apart and now they are doing their best to demonize Russia and China. Trade agreements are the new weapon of oligarchic control. People forget that militarily and technologically the US is by far the most powerful military with the most well equipped clandestine forces yet they cannot invade another nation successfully. Abbott has proven he is a total liability and we may even see Murdoch turn on him. We are just this little nuisance plunked in the middle of Asia providing bases for US clandestine spy networks. Personally I don’t trust any of them however limiting US influence is vital if the world is to have sensible and viable competition. The thing is to know what chess pieces to move however we are so blind to much that is going on that it is extremely difficult. I mean there are still sanctions on Cuba. The US does not forgive or forget quickly and has shown an intolerance for mediation. Look at Israel and the Palestinians which could have been resolved years ago. Labor at least kept us reasonably isolated form the GFC however the EU banks are still basket cases and quantitative easing has been a complete failure leading to worse working conditions and wages world wide. Abbott is driving us into impoverishment totally unprepared for another inevitable global crisis.Our only hope is that we are far enough away from the US and Europe to be able to sit on the sidelines with the likes of India and Brazil. We are caught between US, British, German, Russian, Chinese, Indian and whoever else oligarchs with a small smattering of our own. These bastards and their drive for a free global economy are the viruses of our destruction.

    The US is going off of its rocker with the right wing Tea Party madness which we desperately need to get rid of in Australia. Oh for Julia back again and reasonable and guarded diplomacy. If Clinton gets in the madness continues so pray for Bernie Sanders and Elizabeth Warren. Wouldn’t that get up madam Foreign Ministers nose. A real women in the white house.

    Handing over so much power to the IMF and world bank was a big mistake as the austerity maggots are rife in those institutions.

    That so many insane people have gotten into power is truly disturbing however I think we best focus on home. Never the less the big picture is critically important to our future.

    The long and the short of it is that Abbot has to go and we need to become a non-aligned nation with diplomatic ties across all players. Given the future taking sides will be a noose around our necks we do not need. Other nations do it successfully so why can’t we.

    Been busy so popped off these thoughts late into the night.

    Sometimes one just has to ramble.

    All the best to you all.

  20. stephentardrew

    John read Voltaire years ago but be buggered if I can remember much. Old age creeping in.

  21. Pingback: Stop the deception and tell the Truth. | THE VIEW FROM MY GARDEN

  22. iggy648

    sandrasearle – Thank God our forefathers decided not to go ahead with building the Sydney harbour bridge! It would have been the wasteful, gold plated solution to crossing the harbour. Just building more ferries has served us very well and has been a much cheaper solution, saving taxpayers heaps. We could have been paying it off for generations!

  23. Peter Ball

    Thank you for this , my Brother just put me onto this article, I too never understood all this fully , now I have a better handle , I’ll follow this more closely – Thank you again

  24. Ricardo29

    Annie B, I saw the Julie Bishop interview you referred to and was shouting at Leigh Sales to call her out. You say Sales let her rant, and hang herself. Not sure I agree she did that, though I hope you are right. Suffice to say while I hated what she said I thought JB gave a reasonable account of herself.

  25. mars08

    The budget deficit.

    Wayne Swan’s promise to have the federal budget balanced (or was that in surplus) in FY2012-13, was a stupid, and entirely avoidable mistake.

    Instead of putting things in context and challenging the Coalitions simplistic slogans and Abbotts febrile rants… Swan decided to get into a pissing contest with the opposition.

    The slackers in the government of the day, chose to play the game according to Abbotts rules. In doing so they gave credibility to Abbott’s relentless screeching. The ALP essentially validated the Coalitions angle that a budget deficit is NEVER acceptable.

    When Swan abandoned his promise to deliver a budget surplus, he confirmed Abbotts accusations that the government was incompetent at managing the country and was addicted to some sort of wild spending spree.

    Now we see the Abbott government FORCED to slash spending and make tough but necessary cuts because Labor was so obviously ineffectual.

    Sadly, for much of the electorate, Labor’s inferior financial management is folklore…..

  26. David

    Stephen ditto your (Still I would like to see Shorten wander off into the sunset.)..very much so. Interesting point about Julia, she has been quite visable I hear in Victoria last few weeks. The outstanding success of her book tour and sales bodes well, she is still genuinely loved and respected and Abbott hates her for it.

  27. Ross

    Thank you again John Kelly.
    I’ve said this before, it needs “our ABC” to run a “Fiat economy for dummies” set of programs both on radio and TV.
    People have been tricked into believing the economic drivel spewed out by not only politicians but journalists and commentators alike.
    People trust the ABC, it’s the best place to start what’s sorely needed, an economic information revolution.
    (A hint here, please don’t use any of the mouths on a stick bank economists normally trotted out).

    Ross

  28. Roswell

    Another great post, John.

  29. John Kelly

    Mars08, you have summed things up pretty well there. Swan and Labor got sucked in to a messy ditch and couldn’t get out. The upside is, that Abbott and Co are now in that ditch and they can’t get out either. The bottom line…we all lose. The nation loses.

  30. KarenGrace

    Great information John, terrible attitude. I have never seen a teacher succeed in educating their pupils while also denigrating and lambasting them, and assassinating their characters. Though I understand your frustration, shaming people for what they do not yet know is hardly appropriate, especially given there is so much misinformation around. I found your article informative, but a bit of a turn-off, sorry.

  31. John Kelly

    Thank you, KarenGrace. Unfortunately I struggle to suffer fools well. You clearly were not “educated” by the Marist Brothers. They were gifted abusers of character on several levels. Some of that has probably attached itself to me.

  32. stephentardrew

    John I don’t think logic suffers fools well and that is the problem. With you all the way. Just have to see the US to understand what wishy washy comprise is doing. The suffering of the marginalized in that country is appalling and Abbott wants to follow suit.

  33. flyboy48

    Great article, John … I have never truly understood either but have always had a sneaking suspicion that there was a reasonable answer. Have always been suspicious of why the LNP shifted from an “interest rates will always be lower under a LNP government” mantra to a “we are the only ones who can control government debt” slogan.
    Just wondering where state “debt” fits in here? States can’t generate money like the Feds so guess they aline more closely to the household “domestic” economy?

  34. stephentardrew

    John and Mars8 agree but how do you get Modern Money Theory into the heads of Labor’s left net alone right? The boat is sinking while the ship of fools talk amongst themselves in ancient tongues of economic rationalism and Chicago school idiocy.

  35. David

    John agree with you 100% re the Marist Brothers teaching methods. I spent at least half of my 5 yrs of education from these men, petrified of two of them and their wanton physical punishment at the slightest error in the classroom. Absolute brutes they were. Moving on to College the Marist Fathers were far more civil and learning ( except Geometry and Algebra) a far more agreeable experience. I did learn, sometimes the hard way as in cane, but I did learn.

  36. Joe Banks

    Great article, John Kelly. I have often wondered whether my perception (experience) with the GST system of collection and payment is wrong or just too simplistic. This never ending ‘paying and claiming back’ all the way down the line to the end user has totally baffled me since its inception. When I first learned how we must collect, submit, claim GST (the dreaded BAS) I wondered whether it was just a very bad joke or whether it was a system deliberately devised by Costello to cripple business. 14 years later I still call it ‘the GST idiot system’ because I still find it almost incomprehensible that businesses all over Australia embraced it without a murmur and have continued drowning under the weight of paperwork ever since. Sorry, but John Turner’s brief mention that ‘the GST is such a stupid system’ (but not for the same reason) got me started…

  37. Kaye Lee

    The thing that makes me want to scream is the line “Labor ran up a debt of $667 billion on the nation’s credit card.” This was a quote from the official PM’s page. I emailed and rang the PM’s office about that one pointing out how unconscionable it was for the PM of our country to have that blatant lie on an official government site. It has since been removed but in many interviews lately I hear “Labor left a debt spiralling towards $600 billion.” This is also a downright lie.

    The ONLY place that the figure of $667 billion appeared was in Joe Hockey’s MYEFO and it was based on THEIR policies of removing the carbon and mining taxes, removing the tax on superannuation annual income of over $100,000, protecting people who fraudulently claim business usage for their car, borrowing $9 billion to gift to the Reserve Bank to make the debt look as big as they could, spending billions on Direct Action and rolled gold Paid Parental Leave, etc etc. $667 billion is what the projected debt would be in ten years’ time under COALITION policies. PEFO, prepared independently by Treasury and Finance, tells the story of projections under Labor’s policies and it was a damn sight better than under the Coalition’s policies. Why are they being allowed to claim this as Labor’s debt when it was the scenario under THEIR crap set of policies for the rich?

    And considering their extra spending on planes and roads and wars and SWAT teams, the Coalition are in a shit load of trouble with a “debt and deficit disaster” very much of their own making. I await Hockey’s third attempt at a fiscal document with my red pen ready to go.

    STOP THE LIES!!!

  38. Kaye Lee

    At the risk of labouring the point, if we attribute a projected debt in ten years time to the previous government then the debt inherited in 2013 was all due to Howard which, come to think of it, has some truth in it. Not to mention the GFC….ever….which in itself is ridiculous and makes a mockery of the rubbish the Coalition spout.

  39. John Kelly

    Ross, I think you are right when you say, “I’ve said this before, it needs “our ABC” to run a “Fiat economy for dummies” set of programs both on radio and TV.”
    At the risk of incurring a rage greater than Armageddon by the IPA and like-minded groups, such an educational program could change minds and do it more rapidly than what is occurring on websites and blogs at the moment.

  40. DanDark

    Tones new 3 word slogan will be “Axe The Facts” then it will go something like this
    ” You bet you are, you bet I am”…….

  41. mars08

    I’m expecting some new “terrorism alert” hysteria any day now. Just one more round of AFP raids and MSM horror stories should see this government through to the Christmas holidays. Then there will the cricket, yacht races and BBQs to distract the masses…

  42. Lee

    “Just wondering where state “debt” fits in here? States can’t generate money like the Feds so guess they aline more closely to the household “domestic” economy?”

    States rely on other taxes and levies, e.g. the GST and the emergency services levy. In a nation of our population we really don’t need three levels of government. We could get rid of the state governments and eliminate the restrictions they have with money.

    Now when the conservatives rant about how they are taxpayers and welfare recipients just have their hands out all the time, you can point out that welfare recipients do pay the taxes which are important for providing state government services.

  43. John Armour

    PEFO, prepared independently by Treasury and Finance, tells the story of projections under Labor’s policies and it was a damn sight better than under the Coalition’s policies.

    Kaye Lee, when it comes to deficits or debt it is nonsensical to talk of “better” or “worse”.

    The deficit is just an ex post accounting artifact that by itself is of little interest while the debt is just the stock of private sector assets.

    You have completely missed the point of John Kelly’s post.

    Criticise the hypocrisy of the LNP’s arguments by all means but when your argument turns on the relative size of the deficits you are just helping reinforcing the myth.

    This might help explain:

    Deficit Spending 101

    PS: If just 5% of uncommitted voters understood this we would never have to endure another conservative government.

    But first we have to get the Left to understand it.

  44. John Armour

    Just wondering where state “debt” fits in here? States can’t generate money like the Feds so guess they aline more closely to the household “domestic” economy?”

    The Federal government is the currency issuer and the states (and municipals) are currency users. So you are correct to put them into the same box as households: they have to balance their budgets.

  45. John Armour

    John Kelly: You clearly were not “educated” by the Marist Brothers.

    Their hearts were in the right place, it was their hands you had to watch.

    Great post JK.

  46. KarenGrace

    Thankyou for being gracious John.

  47. Steve

    So if all this debt will never be repaid and basically it’s just an illusion, why was Gillard and Swan so concerned about returning the budget to the black by 2013? If it’s all basically BS, then it doesn’t matter that Hockey is borrowing at a $billion a week. It’s like Buddhism, life/debt is just an illusion.

  48. Jeanette

    Thank you, late getting to your article but worth the wait.

  49. John Kelly

    Steve, your questions go to the heart, not of the economics, but of the political. Experts in the field of Modern Monetary Theory are better placed than me to do the economics although I’m willing to try. But, it’s the politics of the matter that are the real log jam. Gillard and Swan were wedged by the LNP to produce a household budget because that is what most people understand. If Swan had said we don’t need to worry about repaying the deficit, he would have been crucified, not just by the LNP, but by every right wing think tank, the super rich, the Murdoch press, in fact by anyone who would be threatened by a more equal society. They are doing that now with this “debt and deficit disaster” rubbish. The public are tied onto a household budget mentality. That is what has to be broken. A national education programme could achieve that, but you would need a very high profile advocate to support it, e.g. A Warren Buffet, or dare I say it, a Bill Gates type character. That is unlikely. We have had overseas experts come here recently, e.g. Joseph Stiglitz and others, who have been pilloried by right wing elements for their “outrageous” views.

    On the economics side, no it doesn’t matter that Hockey has borrowed $1billion a week since September 2014. In fact, right now it is necessary because private sector investment is in decline. But it is going to get a lot worse for Hockey because he will have to continue “borrowing”. That will be his downfall. He will soon rightly be seen as a failure in economic management, a bed he made for himself when he went on with all that crap about a “budget emergency”. The best time for a national education programme independent of government to start is ten years ago. Hope this helps in some way.

  50. Lee

    “So if all this debt will never be repaid and basically it’s just an illusion, why was Gillard and Swan so concerned about returning the budget to the black by 2013?”

    To win votes.

  51. Kaye Lee

    John Armour,

    I understand your passion for this subject but your arrogant statement that I “have completely missed the point of John Kelly’s post” shows that you have completely missed the point of my comment.

    I fully understand what John is saying and I agree with him. The point I was making is that the Coalition is continually quoting a figure that came from THEIR policies and attributing it to Labor.

    Perhaps I should have used the word “less” rather than “better” but the point remains – this article is titled stop the deception and tell the truth and that is a lie that is perpetuated by every Coalition politician and repeated ad nauseum.

    Even before we discuss the benefits of government spending, that lie should be refuted. It exposes the deliberate deception and manipulation that Hockey is prepared to indulge in and destroys his credibility as far as I am concerned. It goes to the character of the man.

  52. Woodypear

    So, please help me out John. 1. What is the ‘overnight inter-bank lending rate’ and how does it work? 2. Why will the bonds never need repaying?
    Ta.

  53. John Kelly

    Woodypear, I’m not sure if I should be the one to answer you, but here goes.

    The inter-bank lending rate is the interest rate set by the Reserve Bank for commercial banks who trade on short-term loans between themselves. Banks borrow and lend money between themselves in what they call the interbank lending market in order to manage liquidity and satisfy regulations such as reserve requirements.

    When banks have excess funds they want to park those funds where they can get some interest on them. They can either lend to other banks or buy short term treasury notes from the government.

    The issuance of bonds by the Reserve bank is an ongoing process under the direction of the Australian Office of Financial Management when government bills need to be paid. They are issued for a particular time frame, i.e. 5, 10 years. The government pays interest on these bonds twice a year ex nihilo (out of thin air).

    At the end of the period, the bonds are redeemed. Just how they are redeemed is unclear to me. But it could simply be by issuing new bonds or by ex nihilo. Essential it is just an entry in a computer. Issuing bonds is the way the Reserve Bank keeps a lid on money. They soak up money when there is too much of it in circulation (inflationary). When there is too little money in circulation (recessionary) they inject money into the economy by buying bonds from the banks. It’s a complex process but doesn’t involve debt in the way that you and I understand it.

    I’ve really said enough in terms of what I know and hope that someone else will come in and qualify my comments to help you. Watch this space.

  54. Möbius Ecko

    Easy enough to find Woodypear, so why do you ask?

  55. John Armour

    So if all this debt will never be repaid and basically it’s just an illusion, why was Gillard and Swan so concerned about returning the budget to the black by 2013? If it’s all basically BS, then it doesn’t matter that Hockey is borrowing at a $billion a week. It’s like Buddhism, life/debt is just an illusion.

    Firstly, as John says, it isn’t debt at all. The word “debt” to describe the process by which central banks inject money into the economy is an extremely unfortunate legacy of the long-gone era of the gold standard and fixed currencies.

    The confusion this causes is ruthlessly exploited by the Right in the pursuit of its ideological agenda (mainly the shrinking of the role of the State). On an almost hourly basis the myth is reinforced with announcements that we are “living beyond our means”, “leaving a legacy of debt for our children”, “mortgaging our future” and so on. But it’s total bullshit.

    I might have a better understanding of why Swan was obsessed with getting the budget back into surplus when I’ve finished reading his book “The Good Fight” (signed and all!) but my initial impression is that he was so traumatised on being welcomed on taking office by the grinning apparition of the inflation genie (the RBA had raised rates 10 times) that he’s never got over it. Then along came the GFC!

    The point though, about why the so-called debt will never, can never, be paid back is because all it represents is the sum of the “flow’ of deficit spending through the economy: the government creates money out of thin air, spends it into the economy and then drains it off by taxing. Every last cent. It’s like a hydro-electricity scheme: the rain is collected from the sky, flows through the turbines and provides the energy to perform work, before flowing to the sea.

    The government in a fiat money system like ours creates money out of thin air. As much as it wants. To “pay” the dividends on those bonds, it creates even more. It does this by just crediting someone’s account with a keystroke on a computer.

    The trick though (before somebody screams Weimar or Zimbabwe) is to match the flow of created money with the productive capacity of the economy. Too much and you get inflation, too little and you get unemployment.

    When folk say that that all that money we “waste” on interest could be better spent on schools and hospitals you know they have swallowed the bait. If the government was seriously interested in fixing those things they could just write the cheques and provided there were people willing to do the work, the public good would be well served.

  56. John Armour

    “Perhaps I should have used the word “less” rather than “better” ”

    And that’s my point.

    You may think that exposing Hockey’s lies about “Labor’s debt” is more important than the point of John Kelly’s article which was that there is actually no debt is a higher priority but I don’t.

    The kindest thing I could say about your comment is that it was irrelevant to the discussion.

  57. Möbius Ecko

    There’s tomes on this John. Just one source for information.

    http://www.tradingeconomics.com/australia/interbank-rate

    What has to be mentioned here is that if the government is not in debt, that is running surpluses, meaning it is not putting money into the economy either as a stimulus during downturns or as long term investment (infrastructure) during good economic times, it means the private sector is putting in the money and is doing so by debt.

    It was Howard who demonised government debt purely as a political strategy to win elections, not because of any sound economic reasoning. The incongruous things about Howard’s attack on government debt was that he defended it as Treasurer under Fraser for the reasons that are being espoused here, and he initially attacked the current account deficit, not government debt. Remember his debt truck? Howard then went on to preside over one record current account deficit after another, but that was pushed aside by the attack on Beazley’s black hole.

    What you saw under Howard was a significant shift of public debt into private debt, with Australia becoming the most privately indebted nation in the world, something that was clearly unsustainable as voiced by Peter Costello on more than one occasion, but ignored by Howard who went on to say private debt was a sign of affluence and we’ve never had it so good.

  58. John Armour

    John Kelly: “I’ve really said enough in terms of what I know and hope that someone else will come in and qualify my comments to help you. Watch this space”.

    That’s an excellent explanation John. I would just add this:

    When the government spends more than it collects in taxes (that is, deficit spends) money builds up in the reserve accounts of the commercial banks at the RBA.

    It’s these “excess reserves” that tend to drive the inter-bank lending rate downwards, throwing the RBA’s official cash rate (which is actually the inter-bank rate) out of kilter, as the banks try to unload their excess reserves.

    The solution for the RBA then is to swap those excess reserves for bonds, and pay interest on them.

    They could just as easily not bother with the issuing of the bonds and just pay interest to the commercial banks directly, an interest rate equal to the official (policy) cash rate, as some central banks do.

    But that would probably upset the bond traders who probably have hefty private school fees etc to meet.

    Bill Mitchell calls bond issuance “corporate welfare”.

    It would be impossible to keep the debt/deficit myth aloft if more folk understood this.

  59. Ross

    Thank you John Kelly for getting this discussion going and thank you John Armour for you explanations.

    When you first get your head around the fact that the Australian government is the sole issuer of the Australian currency and can issue as much as it likes, the sun begins to peep through the torrent of economic bullshit.

    It’s worth noting the government gets a tad cross with people printing their own version of $50 notes.

    It’s not hard to find out how the economy actually works, search engines work wonders on the internet.

    An excellent place to start is the blog from professor Bill Mitchell, link below.

    http://bilbo.economicoutlook.net/blog/

    And other here, it’s American but you get the drift of what he is saying.

    https://www.youtube.com/watch?v=i35uBVeNp6c

    Enjoy

  60. John Armour

    John Kelly

    They soak up money when there is too much of it in circulation (inflationary). When there is too little money in circulation (recessionary) they inject money into the economy by buying bonds from the banks.

    I don’t think that’s quite right John. I know it’s the text-book explanation of “open-market operations” but the reality is the central bank has almost no direct control of the money supply, contrary to what monetarist theory says. It can only influence the price.

    When a commercial bank creates “bank money” by creating a loan (loans create deposits) the central bank will provide at the request of the commercial bank any additional reserves the commercial bank might need, noting here that the commercial bank doesn’t lend these reserves. Or depositors funds for that matter. Banking is certainly a mysterious business, and just how they like to keep it.

  61. Kaye Lee

    John Armour,

    Could I refer you to the excellent comment made by KarenGrace.

    “Great information John, terrible attitude. I have never seen a teacher succeed in educating their pupils while also denigrating and lambasting them, and assassinating their characters. Though I understand your frustration, shaming people for what they do not yet know is hardly appropriate, especially given there is so much misinformation around. I found your article informative, but a bit of a turn-off, sorry.”

    If your comments to me are any indication of how you treat people who agree with the economic principles of MMT and with the thrust of this article, then I would suggest you have NO hope of convincing the vast majority of people who do not understand this concept.

    If you want to get information across then stop attacking and belittling people. I agree my comment was sideline to the focus of this article and went more to the tactics and character of the government. Your implication that I am ignorant and my comments worthless is offensive.

    In my opinion, governments, economists, environmentalists, campaign managers – in fact anyone who is trying to get the public to understand and agree – need to listen more to teachers on how to present information.

  62. John Armour

    Kaye Lee,

    I usually reserve my sharp tongue for trolls but after many years of trying to be polite to fellow travellers on the Left, and making little progress, I have become increasingly intolerant. The Left doesn’t have the luxury of time.

    Sorry if my criticism offended you.

  63. Kaye Lee

    We are on the same side John. But to convince others, there are many layers of misinformation that need to be addressed before we leap into complicated economic theory, which I certainly find interesting but many don’t.

    We need to take the argument back. Edward Eastwood wrote an excellent article which he linked to above.

    “To convince Joe Average that the public sector should really be in the hands of the private sector, the Right needed to convince the electorate that the keel of the economy, government spending was ‘living beyond our means’ and ‘maxing out the nation’s credit card’.

    Budget deficits were portrayed as ‘black holes’ or ‘ballooning deficits and debt’, while public debt and income support became ‘dole bludging’ and ‘welfare dependency’, underpinned by the emotive plea for surplus in order to stave off; ‘mortgaging our future’ and ‘burdening our grand-children with a mountain of debt’.

    These metaphors have been delivered so earnestly and so frequently by conservative and left leaning politicians alike over the past two decades, that they stand as a shining example of Goebbels observation that if you tell a lie, make it a big one and then constantly repeat it.”

    Unlike the income earners in a household, a country is not going to retire. Unlike businesses, a government does not have to make a profit to provide a financial dividend to shareholders.

    What it must do is be the role model for, and protector of, equality and freedom and our associated human rights. The government must defend us against unscrupulous merchants and employers, and the extreme class structure that results from their exploitation.

    While Tony Abbott spends a fortune on defence, both external and internal, our greatest need for protection is from other institutions and from the abuses of government itself, particularly its collusion with these other institutions.

    We must remind people that the economy is there to serve society, rather than society being asked to serve the economy. We are asking our most vulnerable to pay for a surplus to what end? What difference does an accounting term make to their lives? Whereas the cuts and privatisations that are being proposed will most definitely impact negatively on their lives and future services.

    We should be far more worried about the outcomes of fighting unjust wars and inadequately responding to critical threats such as climate change and the Ebola epidemic than we should about a balance sheet.

  64. Norm in Ngaunnawal country

    I think nonsense and lies will keep coming.
    I remember Amanda Vanstone blaming “Labor’s Black Hole” in the SECOND Howard government.

  65. John Kelly

    Ross, that is a great Youtube link which I’m re-listing here. https://www.youtube.com/watch?v=i35uBVeNp6c

    It doesn’t matter that it’s American. We work on exactly the same principles in Australia.
    Note the difference between what actually occurs and what is government policy. It is policy that is the problem.

    The Bill Mitchell blogs are priceless tutorials for people wanting to learn more. Again, I’m repeating your link
    http://bilbo.economicoutlook.net/blog/

  66. John Kelly

    John Armour, if the commercial banks went on a ‘money creation’ splurge such that their reserves did not balance their loans and they were risking an inflationary cycle, could the Central Bank refuse to credit their reserves account? What would be the outcome?

  67. John Armour

    John Kelly,

    Money creation by the commercial banks is driven by their need to leverage their capital and make a profit out of lending but for that to happen there needs to be willing borrowers of sufficient credit worthiness seeking funds, and all that turns on confidence and expectations.

    Reserves don’t actually need to balance loans, the banks just need sufficient reserves to ensure the stability of the payments system (clearing cheques etc). There used to be strict reserve requirements, ratios to loans, but nowadays it’s just a requirement that reserves be in positive balance, except that very soon adoption of new Basel 3 prudential rules will change all that.

    The Central Bank would never contemplate not crediting the banks’ reserve accounts (that’s where taxes are paid from), or not supplying reserves if requested. That would throw the payments system into chaos. And if a bank was short reserves the Central Bank could impose penalties.

    If the Central Bank got a whiff of inflation they’d just jack up the cash rate quicker than you could say “gotta zip”. Central bankers are still haunted by the nightmare of the late 70’s even as they peer into the deflationary abyss austerity is helping create.

    If I get a chance later I’ll find a Bill Mitchell article that hopefully won’t contradict what I’ve just said.

  68. stephentardrew

    John Armour:

    I don’t think you understand the amazing dedication of Kaye Lee and our great respect for her so please be a little circumspect in future. John, and many of us, have discussed Modern Money Theory regular and though not experts we have a good grasp of the fundamentals. I do appreciate your posts and certainly learn form them however we are more a team dedicated to progressives ideas not some group of rambling trolls so please show some respect.

  69. Lee

    For what it’s worth, I thought John made a valid observation – and by the way he did apologise for offending Kaye. What’s the point of challenging a lie with another lie? Regardless of the size of the deficit left by Labor, it’s not debt. It isn’t helping the left to keep referring to it as debt. When the left shoots down that lie, they can also shoot down the leaners vs lifters lie and expose the demonising of welfare recipients for what it is.

  70. John Armour

    Kaye Lee,

    Thanks for taking the time to post that thoughtful comment.

    I don’t disagree with anything you’ve said but I would hesitate to downgrade the economics that dominates the current political discourse as a preoccupation with a balance sheet.

    The reason I say that is because it was the ruthless and deceitful misrepresentation of what the balance sheet actually meant that delivered government to Tony Abbott.

    The Left ignores that lesson at its peril.

  71. John Armour

    John Kelly,

    Here’s a link to a Bill Mitchell article that should help with your question about banks and reserves.

    The role of bank deposits in Modern Monetary Theory

    In that article there are more links to other articles by Professor Mitchell if the first doesn’t give you a migraine.

  72. John Kelly

    Thanks, John. Helpful as always, if not taxing the brain somewhat. Happy to see you and Kaye have sorted things out.

  73. John Armour

    When the left shoots down that lie, they can also shoot down the leaners vs lifters lie and expose the demonising of welfare recipients for what it is.

    That’s the thing that drives me nuts Lee. If we could just get this simple fact out and more widely known, the Abbott government would be left without a pot to piss in.

    Edward Eastwood also flagged another myth in that excellent article that taxation is not revenue, an even more brain-scrambling paradox than “debt is not debt” and possibly just as important because it cuts the rug from under the “Leaners and Lifters” invention.

    The reality is that we tax the so-called Lifters to take away their spending power and manage demand, not to provide a safety net for the less well-off or fund the sort of infrastructure that advances the public good.

    A government that understood that its only restraint is the real productive capacity of the economy, and nothing to do with money or taxes, might tap into its spending power and do some good for its people, rather than deliberately inflict hardship in pursuit of some totally warped ideology.

  74. mars08

    Regardless of the size of the deficit left by Labor, it’s not debt. It isn’t helping the left to keep referring to it as debt…

    In the current political environment, and given our clueless MSM… it probably IS helping. That’s why Labor is in no rush to challenge that public perception. In the short-term they can use it to clobber the government. Of course … in the long-term it will come back to bite them.

    Typical lazy, facile, shallow, sound grab politics of today’s Australia.

  75. Lee

    Labor have never done anything to correct this lie perpetuated by the Liberals, not in any term of government since 1971. I would hope that when (if) large numbers of the electorate learns the truth about the federal budget, that they would start demanding more of all of our politicians. The four biggest parties are all lying about this. Anyone who does know the truth is keeping their mouth shut. The big question is why?

  76. stephentardrew

    Alan Greenspan knows why. Fear is good according to him though he has stated clearly that deficit is not debt. These guy sees power as being above all else and they don’t want ordinary people to see through their compulsion to drive individual wealth even though they now it increases inequality and drives up productivity while reducing wages and conditions.

    These people are lying and conniving narcissists with little or no moral compasses. The problem for progressives is, not only, how to change the narrative but how to prevent these personality types from having such a profound influence upon the society at large.

  77. mars08

    …Anyone who does know the truth is keeping their mouth shut. The big question is why?

    I suspect both major parties think it’s easier, and more productive, to bang on about a phantomissue rather than have a honest discussion. Does anyone NOT see the parallel with the asylum seeker issue and associated media hysteria?

  78. Lee

    Stephen, why would the Labor Party be buying into a fear campaign directed against them?

  79. mars08

    @Lee… Maybe because, long ago, the ALP bought into neoliberalism and let the Coalition establish the rules of battle??? And now it is far too hard to publicly redefine it’s values?

    There’s a Chinese proverb: “He who rides a tiger is afraid to dismount.”

  80. stephentardrew

    Exactly Mars8:

    The noecon right are still at the heart of the Labor party. They have not changed the debt mantra since Swan’s foray as Treasurer.

    Lee:

    This is fundamentally a deep paradigm shift that critiques the conventional paradigm accepted by left and right. Labor is afraid of the vitriolic attack that would ensue by conservative media which would drown out any possibility of reform. My feeling is Labor needs to get into power then change the narrative while they have influence. Remember the government owns the message. Abbott and Hockey are bashing on about the debt right now in question time. The lies go on day after day laced with vitriol and abuse. It goes on and on supported by a complicit MSM. Economists like Bill Williams and Steve Keen are doing their best however it is going to take a mammoth effort to turn the boat around. One thing is for sure the LNP are drowning in a paradox of their own making. Won’t be long before they sink below the surface of their idiot mendacity

  81. stephentardrew

    Should have been Bill Mitchell sorry folks

  82. mars08

    …Labor needs to get into power then change the narrative while they have influence. Remember the government owns the message…

    Now that aint necessarily so… For many of the voters that really matter, the message is owned by the tabloids and the vapid bobble-heads on SEVEN News.

  83. stephentardrew

    Hey Mars8 I fail to see the difference tabloids owned by corporations, LNP subservient to corporations it goes full circle. If enough people are pissed off with the LNP eventually market forces will push segments of the media to Labor. If Labor looks like winning the next election and offers to restore funding to the ABC and SBS watch the tables turn. As usual it is a web of deceit and lies you just gotta outplay the other team. Still progressives need to get to Labor, the Greens and Independents with a dumbed down version of MMT. Gotta convince Labor there is another more rational and equitable way to do things.

  84. Matters Not.

    Be interested to know what Andrew Leigh, John Quiggin et al think of Modern Monetary Theory, or Chartalism which was an earlier manifestation.

    While I think MMT has much to offer, I soon get lost when it comes to the detail. Just sayin …

    BTW, I don’t need links because I have a virtual library of same. There’s a clear need for SBS or ABC to provide some analysis and I certainly am not suggesting a 10 minute ‘grab’. ‘Big Ideas’ might be a start. But only a start.

  85. stephentardrew

    Matters Not:

    Maybe the left need to utilize austerity as a basis for demonstrating that reduction in economic growth through increasing unemployment in the public sector is logically inconsistent with growth in the economy. Shutting down the vehicle industry is an own goal. If there are no jobs created to replace those sent into unemployment then the economy will inevitably shrink. Is that too hard a story for Labor to promote. Increasing debt and reducing the level of employment, as the LNP are doing, is a recipe for disaster. Resource industry employment. Now that’s looking good. Make it simple and logically consistent.

    One needs to ask after eight years of Quantitative Easing why is US and EU growth stagnant, wages and conditions falling, while productivity has increased. Labor, regardless of infighting, got us through the GFC yet after a year of the LNP the economy is worse on every economic indicator. European Banks are still in crisis. Ergo neo-conservative economic-rationalism is a complete failure and needs replacing.

    No requirement for MMT explanations simply demonstration of the facts at hand. Then alternatives can be discussed. Japan proves that low interest rates are definitely not the solution because they are now going into a third recession, in part, due to quantitative easing.

    Similarly UE countries lack national fiat currencies and therefore lack the benefits for monetary policy. Germany’s call for austerity has been a complete failure.

    Point is it was the US financial sector that caused the GFC and there is no resolution to banking deregulation under ineffective Dod-Frank. Reintroduction of some form of Glass Stegal is the only viable solution to financial stability.

    Bit scrambled but the basic narrative is there. Labor must tell people not ask them or try to play tit for tat with the LNP they simply need a strong and consistent message. If the economy is still crap in two years, and it is certainly looking that way, then the public are going to want an alternative narrative. The fact that fiscal policy helped get us out of the GFC is a great bargaining chip. It’s all front and confidence.

    Sure dumb it down but for heavens sake demonstrate some critical thinking and creative alternatives.

  86. mars08

    stephentardrew:

    …If enough people are pissed off with the LNP eventually market forces will push segments of the media to Labor. If Labor looks like winning the next election and offers to restore funding to the ABC and SBS watch the tables turn…

    If the American experience is anything to go by… and.. sadly, it usually is… any shift will be unspectacular and short-lived.

    If the ALP was to win the next federal election… the right-wing news outlets and commentators would simply double down on the crazy. Those people do not compromise.

    No matter how “centrist” a future Labor PM might be, the hardcore right will paint them as unrestrained socialists. Unfortunately we have less media diversity than the US, so any moderate voices will be drowned out. Conservative forces which control the media (and their buckets of cash) will ensure that any attempt to re-frame the “debt and deficit disaster” myth will get very little oxygen. We have nothing in this country that comes close to redressing their influence.

    As was the case under Rudd/Gillard (and in Obama’s America), relentless media negativity and hysteria will be the order of the day. Sadly, trying to defuse any bogus “issues” (assuming Labor is willing) will be next to impossible.

  87. David

    Well thanks mars just what I needed, a depressing,morbid pessimistic start to the day, to add to the misery the Torys have been heaping on the nation relentlessly…think I will just go and have a bloody good contemplation of my navel.

  88. Lee

    Alas it’s true, mars. I never cease to be amazed at how the right can fool people again and again into voting for them, with the constant fear tactics that amount to nothing, the bitchiness directed at their opponents, and the shafting of those on lower incomes.

  89. Kaye Lee

    I have more hope. We don’t need that many votes to change government and the young people certainly don’t like Abbott. So I am quietly confident that they will get rid of him next election – first hurdle jumped.

    World pressure will demand action on climate change and renewable energy – second hurdle.

    Labor understand the importance of education and research – third hurdle.

    Now we just need to help everyone to understand the point of this article.

    My imperfect understanding is that we don’t borrow money, hence we have no debt. We issue government bonds that people buy. This costs us nothing. We then spend that money as we need to with the interest being the only cost to us (and since this goes back into the economy, it isn’t really a cost?). When the bond is redeemable we can issue more bonds if we need to, as we can at any time.

  90. Lee

    Rumour has it that Abbott will be replaced as PM before this current sitting of parliament ends, so sometime in the next 2 weeks. With the usual pre-election sweeteners in the 12 months before the election and a more moderate leader, I can see plenty of gullible voters putting them back in power.

  91. David

    Lee a perfect example of the right blatantly lying and Labor ignoring…. In the Senate yesterday during the debate on Senate Notices of Motion. a gormless mouth almighty Lib while lying in his defense of Abbott’s lies re ABC and SBS cuts, this excuse for a high output amplifier repeated the part of Julias carbon pricing statement that implied she lied.
    Julia said and I quote in full from the Australian 20th August 2010 article written by P Kelly……”I don’t rule out the possibility of legislating a Carbon Pollution Reduction Scheme, a market-based mechanism,” she said of the next parliament. “I rule out a carbon tax.”.
    This lying slab of gutter refuse, I didn’t get his name, he was a back bencher, he chose to twist the words and use….”I will legislate a carbon tax”. I knew immediately that was not true and so would have every labor Senator in the chamber, not one chose to repudiate and defend Julia.
    That’s the sort of stupidity they carry on with, not immediately going on the attack just letting it slip by to be devoured by whoever hears and of course the Govt will use it in media releases, on their web pages etc.
    It is not good enough to ignore such lies. That one in particular.
    http://www.theaustralian.com.au/national-affairs/julia-gillards-carbon-price-promise/story-fn59niix-1225907522983

  92. Lee

    David, did you see Jason Clare tear Tony a new one yesterday? “Were you lying then, are you lying now, or are you just a chronic and habitual liar”? Abbott had his back to Clare the entire time. The video is on Clare’s Facebook page if you want to watch it.

  93. David

    Thanks Lee I did see Jason, he is one of labors star debaters, I am very impressed with him, man has polish and talent and excellent ad lib abilities which makes for top debating skills, beats reading in full from a prepared script (I appreciate some need to).
    Jason is IMHO a potential leader, he has that IT, is personable and being damn good looking never goes astray. It was an excellent speech and to see Abbott, Pyne and Hockey in a make believe phony conversation, backs turned was pathetic, but true to form.
    10/10 Jason

  94. John Armour

    We issue government bonds that people buy. This costs us nothing. We then spend that money as we need to with the interest being the only cost to us (and since this goes back into the economy, it isn’t really a cost?). When the bond is redeemable we can issue more bonds if we need to, as we can at any time.

    Nearly there Kaye Lee.

    Please read my reply to John Kelly on November 23, 2014 at 9:20 am and this article by Stephanie Kelton for a bit more explanation:

    http://neweconomicperspectives.org/2010/11/yes-deficit-spending-adds-to-private.html

  95. John Kelly

    Kaye Lee, even the interest on those bonds is created out of thin air.

  96. John Armour

    stephentardrew:

    Similarly UE countries lack national fiat currencies and therefore lack the benefits for monetary policy.

    I think you mean fiscal policy.

    Sovereignty over their currency is only part of the problem. The are, de jure, constrained by the Stability and Growth Pact which limits deficits to 3%.

  97. stephentardrew

    John: after writing it knew I made a mistake and thought I would wait till someone pointed out my empty-headed senility. I do know about the 3% limit but some nations have ignored it, Germany too, if I remember rightly. Thanks for the response anyway.

  98. Lee

    Never mind educating the right. We need to educate the left first. How many articles and comments have been published on this site in recent months about MMT and how our income taxes don’t pay for anything? We’ve still got regular posters commenting about their taxpayer status and how they are funding all public services.

  99. John Armour

    Never mind educating the right. We need to educate the left first.

    Spot on, Lee.

    And one would think that would be the easier task, if only because the policy options that an understanding of MMT creates are such a good fit with the Left’s ambitions for a fairer, better, society.

    As to your observation that regular posters still rehearse the myths despite all the myth-busting articles, I guess we just have to ignore the usual tribal niceties and set them straight. Politely of course.

    : )

  100. stephentardrew

    Mars8 You are a wealth of positivity but afraid I have to partially agree with you on this one. I think there are going to be completely different circumstances in the not too different future that may scupper right wing dogmatists. Just one more GFC and they are toast.

  101. John Armour

    Lee,

    Re your comment a couple of days ago…

    The four biggest parties are all lying about this. Anyone who does know the truth is keeping their mouth shut. The big question is why?

    I had about a 5 minute discussion with Wayne Swan about all this last week at a book launch.

    We touched on Bretton Woods, fiat currency, sectoral balances, and debt. When I suggested that it was mathematically impossible to run a budget surplus at the same time as a current account deficit while the private sector was saving more than it was spending he just said he disagreed.

    When he asked me what I would do I said I’d run deficits. He replied that this would just create more debt. The sad thing is that he genuinely believes this. It’s what he’s been taught.That aside, thank Christ he was there when the GFC unraveled.

    Ironically, in his entertaining talk he mentioned “secular stagnation” as the issue we may now be facing and Paul Samuelson prescribed continuous deficits for that particular ailment.

  102. Lee

    Thanks John. It highlights the need for appropriate qualifications to govern the country.

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